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Lauder Sales Slip From Coronavirus Closures

The company has a post-COVID-19 business plan that includes closing some freestanding stores and department store counters given rapidly accelerating e-commerce sales.

Sales at the Estée Lauder Cos. Inc. slipped due to coronavirus — 4 percent for the fiscal year, and 32 percent for the most recent quarter — but the company has formulated a plan.

Lauder said that for the next two years it will work on the Post-COVID-19 Business Acceleration Program, which is meant to reallocate resources related to distribution. The pandemic has caused beauty sales to rapidly shift online, and the plan centers around closing some stores and department store counters, and laying off related employees, in order to reallocate resources around e-commerce.

For the fiscal year, Lauder posted a 4 percent net sales decline to $14.3 billion, with reduced net earnings of $696 million. Declines spanned all categories except skin care — a bright spot — which was up 13 percent to nearly $7.4 billion. Makeup sales dipped 18 percent, to $4.8 billion, fragrance sales declined 13 percent, to $1.56 billion, and hair-care sales fell 12 percent, to $515 million.

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For the quarter ended June 30, Lauder’s sales declined by 32 percent, to $2.43 billion, due to the pandemic and related store closures. The net loss was $460 million in the quarter.

“Fiscal 2020 was a year without parallel, as we delivered record sales and exceptionally strong adjusted EPS growth in our first half and navigated with agility through an unprecedented pandemic in our second half,” said Lauder president and chief executive officer Fabrizio Freda in a statement. “The second half also marked a period of profound pain as tragic events in the United States highlighted the systemic racial injustice that has plagued our society for far too long.”

He praised the company’s “multiple engines of growth strategy,” and said the Estée Lauder brand grew double digits for the third consecutive year. The business also grew in Asia, and the acquisition of Dr. Jart+ added a point to growth.

Freda said the company plans to remain focused on employee well-being, and that its “sense of urgency to act on our recently announced racial equity commitments is strong.” In June, Lauder laid out a five-year plan to hire more Black employees to reach parity with the U.S. population.

During the pandemic, the sales of many companies, Lauder included, were massively impacted by global store closures. But stores are mostly reopen, Lauder said, and their closures were offset by a “tremendous acceleration online,” the company said. Online sales in the Americas and mainland China made up about 40 percent of total sales, the company said.

E-commerce is becoming an even bigger priority for Lauder going forward.

As part of the post-COVID-19 plan, the company expects between 10 and 15 percent of freestanding stores to close globally, and to cut between 1,500 and 2,000 jobs, about 3 percent of its current workforce. The jobs being cut are primarily point of sale employees and related support staff “in the areas that were the most disrupted,” the company said. The total includes redeployment of certain employees and investment in new positions in online-related jobs.

The post-COVID-19 plan is expected to have annual benefits between $300 million and $400 million before taxes. Lauder expects restructuring and other charges between $400 million and $500 million.

Lauder also plans to increase manufacturing capabilities, and expand fulfillment around the online business, as well as invest in growing in Asia.

The company said it expects net sales to decline between 12 and 13 percent for the next fiscal quarter.

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